With the advent of the Internet and other methods of electronic communication as well as the increasing flexibility and sophistication of microchips, there is an emerging trend to engage in "cashless" transactions. Such transactions are typified by electronic transfer of funds of one form or another with no paper money actually changing hands.
Historically, credit cards are one such form of cashless transaction methodology. The typical situation is for a consumer to present a credit card either in person or over the telephone to a merchant or a service provider (collectively a "merchant"). The merchant verifies that the credit card is valid and accepts what amounts to a promise of payment from a credit card service for the goods or services that are provided to the consumer. The problem with credit card transactions is that a merchant must wait a certain number of days for finds to be received for goods that are shipped immediately. Further, the merchant must pay a "penalty" in the form of a credit card commission for the certainty of receiving funds from the credit card company. Thus from both a time and "cost of doing business" perspective credit cards have certain disadvantages for merchants.
Debit cards are yet another attempt to engage in cashless transactions. In a debit card scenario rather than funds being accessed by a credit card company, a debit card accesses funds that are directly in a consumer's bank account. Thus if money is present in a consumer's bank account, such money may be spent. If insufficient funds are present in the account, the amount of a purchase cannot be spent. The debit card also leads to faster transfer of funds since funds are transferred out of the account of the consumer when money is spent. However, there is still a lag in time for money to reach the merchant's bank account.
An approach to the immediate receipt of funds in a cashless transaction is the "stored value card." The stored-value card comprises a credit card-like device with a microchip embedded in the card. The microchip comprises storage capability and other security features which prevent its being tampered with. The stored-value card allows an electronic representation of a consumer's money to be stored on the card. That money is deducted from a consumer's bank account and represented in electronic form on the stored-value card.
When a merchant is prepared to accept the stored-value cards, that merchant has a stored value card of its own coupled to a transfer device. That transfer device could be a point of sale terminal optimized for stored-value transactions. When a consumer desires to purchase goods or services with a stored-value card the consumer takes the stored-value card to the point of sale, and inserts the stored-value card in the point of sale device. Using the security features on the card, funds are then subtracted from the consumer's stored-value card and transferred to the stored-value card of the merchant. In this fashion the electronic representations of cash are immediately transferred and made available to the merchant and immediately deducted from the consumer. Thus there is no delay and processing expense is minimized.
In this fashion the typical transfer where money comes from a consumer and must be settled through a consumer's bank to a settling agency thereafter sent to a merchant's bank and thereafter sent to the merchant's account is eliminated from the process. Thus the entire settlement procedure and the attendant time delay is eliminated.
A stored-value card of this fashion is represented in an embodiment marketed by Mondex USA. This system comprises credit card-like devices with a microprocessor embedded in the "credit card" which in turn digitally stores the consumer's electronic equivalent of cash.
While stored-value cards eliminate the settlement time and give certainty to the consumer/merchant transaction, a difficulty with use of stored value cards is that both the merchant and the consumer must be using their respective cards simultaneously. A consumer who desires to purchase goods and services who goes to a merchant that does not have stored-value card equipment, simply cannot purchase goods and services without using a credit card or cash or some other transaction. Similarly a consumer who does not have a stored-value card that goes to a merchant that has stored-value card equipment and infrastructure has no way to pay the merchant in the rapid fashion embodied in the stored-value card technology.
A need therefore exists to allow consumers and merchants to purchase goods and services and deliver goods and services to one another using stored value card technology, when one of the parties does not have such technology.